What swap transaction would accomplish this objective

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Dell Computers would like to borrow pounds, and HP wants to borrow dollars. Dell can borrow on its own dollars at 7 percent and pounds at 9 percent, whereas HP can on its own borrow dollars at 8 percent and pounds at 8.5%

a. Suppose Dell wants to borrow £10 million for two years, HP wants to borrow $16 million for two years, and the current ($/£) exchange rate is $1.60. What swap transaction would accomplish this objective? Assume the counterparties would exchange principal and interest payments with no rate adjustments.

b. What savings are realized by Dell and HP?

Reference no: EM131555337

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